Negotiation is the art of bargaining with others in order to complete a business transaction. Often, I get asked how to negotiate in business as well as how clients can structure sales presentations to bring about sales. There is no magic formula to help you close the deal. However, I have learned some key principles that have helped me. I have also learned that biblical principles protect you from crossing the line between good sales technique and unethical manipulation.
1. Be willing to walk away from the deal.
Of course you want to make the deal. However, if you want it too badly, you have no bargaining power. You will cave in and give too much just to make the deal. Jesus taught, “Therefore do not worry about tomorrow, for tomorrow will worry about itself. “(Matthew 6:34, NIV)
It is important to release every transaction to the Lord, regardless of the pressure you feel. If you give a person everything they want, you will probably land the deal. However, this gives you no negotiating position. When you are willing to walk away from a deal, you have negotiating power.
Auctions are good examples of negotiation. When I purchase something at an auction, my first principle is to determine in advance what I am willing to pay. Since I am looking for a deal, price is important. When the bidding passes my good deal price, I stop biding. Other times, I make an offer and explain that it is my best price. Then, the seller can take or leave the transaction, as can I.
2. Understand what factors make up your bottom line.
This includes the price you are willing to pay and the terms you will agree to. I will not help clients negotiate until they are clear about what their acceptable terms are.
One client built custom windows and had a warehouse full of wrong sized windows. I helped him sell them to a builder at a huge discount, who agreed to work with the miscellaneous sizes. The builder paid 15% of the cost, but my client got some cash. My client’s bottom line in negotiating with a builder involved using the miss-sized windows. The successful negotiation meant that the windows didn’t end up in a dumpster.
Another example of remaining firm on your terms happened when I bought an investment home. I offered far less than the asking price. When the seller was insulted by the low price, I explained that it was the maximum price I could afford to pay since it would be rental property. I invited the seller to take the offer or leave it. He passed. However, months later he came back and wanted to take the price.
Jesus asked a person, "What do you want me to do for you?” (Mark 10:36, NIV) Unless you know what you want, you won’t get it. Be clear about your bottom line terms.
3. Don’t waste time.
Psalm 90:12 instructs us to make the most of our time. One implication in negotiation is to avoid making silly offers that no one could afford to accept or haggling over the last dollar of a transaction.
I worked with a client who wanted to buy a business. My client’s last offer was $220,000 cash. The seller wanted $230,000 which was still below my client’s maximum price. However, they were at an impasse. I told my client to take the $230,000 and move on. While further haggling may have saved a few thousand dollars, the several extra weeks it would have taken was time that could have been put to better use.
4. Show the seller the money.
I offered $300 for an item at a home sale, but the seller wanted $450. I said I would offer $300 cash. The seller came back with $400. Instead of making another offer, I took three one hundred-dollar bills out and said, “I will give these to you now if you accept the price.” He took the cash.
When buying higher ticket items, I determine in advance the price I am willing to pay. After a short time, I write out a check for my price and hand it over to the sales person. As I write the check, they start thinking about commission. When I hand over the check, the sales person usually says they’re sorry but my price is too low. Then, I tear the check in half, and write my cell phone number on the half with my price. As I give it to the sales person, I explain that I am going to another dealer with the same offer. I invite the sales person to call me if they want the deal before I buy elsewhere. Most of the time, they do!
In the Bible business transactions were immediate. Moses shared the following standard for wage transactions, “Pay him his wages each day before sunset.” (Deuteronomy 24:15a, NIV)
5. Understand the market.
You can’t make reasonable offers or entertain sales offers if you don’t know what the market will support. The prophet Hosea wrote that “people without understanding will come to ruin!” (Hosea 4:14, NIV)
A good friend wanted to unload a property and asked $250,000. He received an offer for $215,000 which he planned to reject. I helped him do the market research that demonstrated that the asking price was too high. He settled on $220,000 rather than lose the buyer.
It’s also important to understand the value of using cash. Most people need to finance $6,000 to $15,000 for a used car. If you can write a check on the spot, you should press for a better price because the buyer who offers $400 more may not get financed.
6. Understand what the seller wants and needs.
When selling a business, understand that a seller’s motivation is a key factor. King Solomon taught, “The purposes of a man's heart are deep waters, but a man of understanding draws them out.” (Proverbs 20:5, NIV)
I was working on one transaction with a client to buy a small mobile home park. The price was around $1.5 million; my client wanted to pay $1.25 million. The seller was in a strong position, and the property had good cash flow. The seller was older and wanted long term income without continuing to manage the property. I suggested offering a longer term land contract with a solid down payment. The seller accepted, liked the higher interest rate, and the deal closed.
7. Know when to stop talking.
After you make an offer, say nothing and wait for an answer. Time will be your friend. If you start talking after you make your offer; you are negotiating with yourself, not the seller. Be patient. As King Solomon understood and said, “A patient man has great understanding.” (Proverbs 14:29a, NIV)
None of these principles will be effective unless you are willing to walk away from a deal. Sometimes when a transaction starts to fall through, it may be the Lord’s way of protecting you. Let biblical principles help you walk through the doors God opens, rather than banging through closed doors on your own.
Steve Marr, Your Christian Business Coach
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